Have you ever finalized and transacted with a supplier, only to realize, later, that you’d made the wrong choice?
This could be in any form.
For example, you may have found a supplier that offered a good price, but later realized that its quality standards were low, or that its communication was unacceptably poor.
Or in cases of sub-contracting, equipment supplied and branded with your logo are substandard.
It makes no difference what business you are in; suppliers and vendors play a key role in your company’s success.
The real cost of mismatches between your needs and a supplier’s offerings are not always obvious. Such mismatches can add costs, delay projects and even damage your organization’s reputation when the equipment supplied is substandard.
Selecting your right supplier (for machinery, equipment or spares) includes much more than a focus purely on cost.
If you are actively involved in supplier selection you already know that it can be an exhaustive process. Because there are a wide range of variables to consider that make the supplier selection process complex and time-consuming.
You may introduce standardization criteria through an assessment framework or template for selecting suppliers. Having a formalized system in place to track and evaluate supplier and vendor performance is essential to the smooth operation and profitability of your company. This also helps you level the playing field whilst giving you a standardized procedure removing some of the guesswork from the process.
But how should you evaluate your potential suppliers? Here’s where Ray Carter’s work assumes significance.
To the uninitiated, Ray Carter (Director of DPSS Consultants) first outlined his Seven Cs of Supplier Evaluation in a 1995 article in ‘Purchasing and Supply Management’. He later added three new Cs to the model.
The “10 C’s of Supplier Evaluation” help you avoid supplier or vendor problems. Such a checklist helps you to outline organizational needs, understand how suppliers can meet them, and identify the right supplier for you.
While your criteria of selection for rubber and tyre machinery suppliers may be subtly different – developing a standardized set of requirements will help simplify the process and remove subjectivity.
So what to consider in 10 C’s of Supplier Evaluation that benefits you quicker?
Does your supplier have the skills to deliver the products you require?
This is fundamental to being a good supplier and competency needs to have evidence to back it up, there is no point in you simply making assumptions. Your supplier needs to provide hard evidence.
So, make a thorough assessment of the supplier’s capabilities measured against your needs, but then also look at what other customers think. How happy are they with the supplier? Have they encountered any problems? And why have former customers changed supplier?
When you evaluate, look for customers whose needs and values are similar to yours, to ensure that the information you gather is relevant to your organization.
Your supplier needs to have sufficient capacity to enable it to operate flexibly. The more flexible the supplier is, the more it can meet fluctuations in demand.
Look at the supplier’s entire resources (including staff, equipment, storage, and materials). Does it have the resources to meet your needs, particularly when commitments to other clients are considered? Can your supplier flex their capacity in line with your requirements?
The supplier needs to have enough capacity to handle your firm’s requirements. So, how quickly will it be able to respond to these (and to other market and supply) fluctuations?
Quality is a key requirement for any business.
Your supplier needs to provide evidence that it’s committed to high quality standards. Wherever appropriate, look for quality initiatives such as ISO 9001 and Six Sigma, within the supplier organization.
The supplier also needs to show that it is committed to you, as a customer, for the duration of the time that you expect to work together. This is particularly important if you’re planning a long-term relationship with the supplier. You’ll need evidence of its ongoing commitment to delivering to your requirements, whatever the needs of its other customers.
Does your supplier have the commitment to maintain suitable quality performance?
Query how much control this supplier has over its policies, processes, procedures, and supply chain. Control is important because it is control of the processes and internal procedures that needs to be looked at, so that a full profile can be established of the supplier and how much control the supplier has.
Control can take various forms, for example, how much control does the supplier have in terms of its suppliers warning it when goods become scarce or even stop being produced.
So there are lots of different aspects to control. Is your supplier in control of their policies and procedures? How will it ensure that it delivers consistently and reliably, particularly if it relies on scarce resources, and particularly if these are controlled by another organization?
This is the financial standing of the supplier. Your supplier should be in good financial health.
Cash-positive firms are in a much better position to withstand the ups and downs of an uncertain economy. So, does your supplier have plenty of cash at hand, or is it overextended financially? And what information can the supplier offer to demonstrate its ongoing financial strength? Does your supplier have adequate financial standing? Are they in a robust position or are they teetering on the edge of financial meltdown?
Look at the cost of the product that this supplier offers. You will find it interesting to observe that cost is not listed as the No. 1 issue and is in the middle of the 10 C’s of Supplier Evaluation list for a reason: other factors, such as a commitment to quality and financial health, can potentially affect your business much more than cost alone, particularly if you will be relying on the supplier on an ongoing basis.
What is the cost of products from the supplier? How does this compare with the other firms that you’re considering?
(On a related note, you may also read our post on Total Cost of Ownership)
How will this supplier ensure that it consistently provides high quality goods or services?
No one can be perfect all of the time. However, the supplier should have processes or procedures in place to ensure consistency. Ask your supplier about its approach, and get a demonstration and a test product, if possible.
Does your supplier guarantee a consistent product time and time again?
This is an interesting point. Carter felt that the supplier should be one that has the same values and ways of operating as the customer. In a sense this is almost about compatibility, but it makes sense for the supplier and the customer to have some shared values and practices, otherwise the relationship could be strained in the future, simply due to the clash in different cultures.
The best business relationships are based on closely matching workplace values. For example, what if your organization’s most important value is quality and your main supplier cares more about meeting deadlines? This mismatch could mean that it’s willing to cut corners in a way that could prove to be unacceptable to you.
So evaluate, does the supplier share the same cultural values as your organization? Does it make sense that your supplier shares similar values and attitudes to avoid strains in the future relationship?
This is a reflection of increased environmental awareness and refers to your supplier’s commitment to sustainability, and its adherence to environmental laws and best practices.
So in a sense, suppliers are asked to demonstrate their ‘green credentials’. What is it doing to lighten its environmental footprint? Ask to see evidence of any green credentials that it’s earned.
Also, does this supplier treat its people (and the people around it) well? Does it have a reputation for doing business ethically? Does your supplier have an appropriate sustainability policy?
Although it may seem obvious, query how the supplier plans to keep in touch with you. Will it be by fax, email or telephone?
Communication also covers the ICT software and applications that the supplier has. What tools will you utilize to communicate with your supplier? Will its proposed communication approaches align with your preferred methods? And who will be your contact person at this firm?
It’s also important to find out how the supplier will handle communications in the event of a crisis. For example consider how you will manage problem resolution and issue escalation. How quickly will it notify you if there’s a supply disruption? How will that communication take place? And will you be able to reach senior people, if you need to?
Summarizing, the Carter 10 C’s of Supplier Evaluation model is an internationally recognized approach, taught in procurement studies, and acknowledged as an all-inclusive means of making sure that a thorough method is adopted to evaluate suppliers in a fair manner for all potential entrants.
How do you evaluate and select your suppliers?
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